Govt approves 20 percent premium on gas produced from new wells for ONGC

The implementation of the policy decision aligns with the national vision of achieving the target of share of natural gas in the Indian energy basket from 6 per cent to 15 percent by 2030.

The government has granted approval for a 20 percent premium above the regulated or APM price for any natural gas produced by ONGC from new wells, this was announced by the company on Monday. As per guidelines for domestic gas pricing, domestic natural gas price (APM Price) was fixed at 10 percent of the Indian Crude basket price as announced by Petroleum Planning and Analysis (PPAC) every month. It was provided in the guidelines that for the gas produced from new wells or well intervention in the nomination fields of ONGC/Oil India Limited, there would be a premium of 20 percent over APM prices (i.e. a total of 12 percent of the Indian Crude basket price for new gas). The modalities for the same had to be worked out by the Directorate General of Hydrocarbon (DGH) for approval of the Ministry of Petroleum and Natural Gas (MOP&NG).

In pursuance of the above guidelines, MOP&NG has now notified the allocation of gas produced from new wells or well interventions from nominated fields of ONGC/OIL at a 20 percent premium over the APM price.

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The enhanced price for new gas will make the new gas development projects viable and help the ONGC to augment the production of Natural Gas from nominated fields in challenging areas that require a higher amount of capital and technology. This will enhance the investment capacity of the Company to take up development projects which are otherwise capital-intensive and involve a higher degree of risks requiring commensurate prices. ONGC Board has recently approved the Daman Upside Development project in our nominated field of Mumbai High at a cost of ~ INR 7,800 crore for increasing the domestic gas production and the job has already been awarded for execution. The peak production envisaged from this project is around 5 MMSCMD.

ONGC Board has also approved another project Integrated Development of 4 Contract areas under DSF-II  at a Project cost of ~ INR 6,000 crore with a peak production of around 4 MMSCMD of gas where GoI has already allowed pricing and marketing freedom under DSF Policy. Job has already been awarded for execution of this project also.